For immediate release
Contact:

Barbara Roper
(719) 543-9468

Edmund Mierzwinski
(202) 546-9707

Sally Greenberg
(202) 462-6262

Celia Viggo Wexler
(202) 833-1200

June 11, 2003

WASHINGTON, D.C. - At least one of the Big Four audit firms is
exploiting loopholes in the recently adopted auditor independence rules
to systematically undermine the requirement that audit committees
review and pre-approve any non-audit services to be provided by the
company's independent auditor, five of the nation's leading consumer
groups have charged.

In a letter sent to members of the Securities and Exchange Commission
this week, Consumer Federation of America, U.S. Public Interest
Research Group, Consumers Union, Consumer Action, and Common Cause said
a document apparently being used by Ernst & Young to advise its
audit clients on how to implement the Sarbanes-Oxley Act requirement
that audit committees pre-approve all non-audit services "makes a
mockery of Congress's intent that this process serve to ensure the
independence of the audit."

The groups called on the SEC to clarify that the approach being
recommended by Ernst & Young is not acceptable, to investigate to
determine whether other firms are advocating a similar approach, and to
call a halt to such practices where it finds them. "Given the vehemence
of Big Four firm opposition to meaningful auditor independence reforms
and their virtual unanimity in arguing for weakening amendments to the
auditor independence rules, we are concerned that the other firms are
likely advocating an equally misleading view to their clients of audit
committee responsibilities," the groups wrote.

The pre-approval requirement was included in the Sarbanes-Oxley Act to
supplement the list of services auditors were prohibited from providing
because they violated basic principles of auditor independence.
Recognizing that no such list will ever be all-inclusive, the
legislation's authors made clear that audit committees were responsible
for reviewing all non-audit services proposed to be provided by the
company's auditor to determine whether they created similar conflicts.

Quoting from the Ernst & Young document, the consumer group letter
outlines how Ernst & Young is using concessions won from the
Commission during the rule-making process to undermine this central
reform of the Sarbanes-Oxley Act. It does so by encouraging audit
committees to rubber stamp whole categories of services, by dismissing
independence concerns related to any services but those that were
specifically prohibited by Congress, by suggesting that the SEC did not
intend audit committees to consider the principles of auditor
independence in reviewing non-audit services, and by encouraging audit
committees to group virtually all non-audit services in the audit or
audit-related fee categories when calculating whether fees for
non-audit services create an unacceptable conflict.

The groups noted that the audit committee that faithfully followed the
approach advocated by Ernst & Young would give the kind of specific
review and approval anticipated by Congress for all non-audit services
to only a handful of services and would review those services without
regard to the basic principles of auditor independence. "The idea that
the pre-approval process would have any value in assuring the
independence of the audit under such an approach would be a joke, if
recent experience hadn't shown just how painful a lack of auditor
independence can be for average retail investors," they wrote.

The groups called on the SEC to rectify a problem it helped to create, by:

rescinding the rule provision allowing pre-approval of non-audit services through policies and procedures;

codifying as part of the rule language the basic principles for determining auditor independence;

clarifying that audit committees are expected to review
all proposed non-audit services with an eye toward determining whether
they violate these basic principles;

adding tax planning services and tax services for company
executives to the list of non-audit services auditors are prohibited
from providing; and

revising the audit fee disclosure rules to, at a minimum,
remove fees for services not directly related to the audit from the
audit fee category and rename the audit-related fee category to more
accurately reflect its content.

"Although it may not have realized it at the time, the Commission
handed the audit firms a roadmap for evading the audit committee
pre-approval requirement when it issued its auditor independence
rules," the groups wrote. "The Commission must now step in to restore
this important auditor independence reform."